Presentation

Financial Results for the 1Q FY06/3
(First Quarter of Fiscal Year ending March 2006)
July 28, 2005
NEC Corporation
(http://www.nec.co.jp/ir/en/)
c NEC Corporation 2005
1
CAUTIONARY STATEMENTS:
This material contains forward-looking statements pertaining to strategies, financial targets, technology, products and services, and business
performance of NEC Corporation and its consolidated subsidiaries (collectively "NEC"). Written forward-looking statements may appear in
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-looking statements can be identified by the use of forward-looking words such as "believes," "expects," "may," "will," "should," "seeks,“
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Forward-looking statements are not guarantees of future performance and involve inherent risks and uncertainties. A number of important
factors could cause actual results to differ materially from those in the forward-looking statements. Among the factors that could cause actual
results to differ materially from such statements include (i) global economic conditions and general economic conditions in NEC's markets, (ii)
fluctuating demand for, and competitive pricing pressure on, NEC's products and services, (iii) NEC's ability to continue to win acceptance of
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The management targets included in this material are not projections, and do not represent management's current estimates of future
performance. Rather, they represent targets that management will strive to achieve through the successful implementation of NEC's business
strategies.
Finally, NEC cautions you that the statements made in this material are not an offer of securities for sale. The securities may not be offered or
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financial statements.
(Note)
(1) "Operating income (loss)" set forth above is a measure commonly used by other Japanese companies that report their financial results in
accordance with generally accepted financial reporting practices in Japan. “Operating income (loss)” is calculated by deducting cost of sales
and selling, general and administrative expenses from net sales. Management believes this measure is useful to investors in comparing NEC’s
results of operations to other Japanese companies. This measure, however, should not be construed as an alternative to "income (loss)
before income taxes" or "net income (loss)" as determined in accordance with U.S. GAAP. Please refer to the condensed consolidated
statement of operations for the calculation of the operating income (loss).
(2) i-mode is a registered trademark of NTT DoCoMo, Inc.
c NEC Corporation 2005
2
As of July 28, 2005
Executive Summary
Management Issues for FY 06/3：
Steady implementation of the ongoing measures for turnaround
and additional measures to further enhance growth
1H/OP:
1Q/OP:
Exceeded the forecast
■Steady IT / NW
Solutions
businesses
■Flagging
Semiconductors
business
c NEC Corporation 2005
Expect to achieve ¥15bn target, enhancing
NEC Group-wide management efforts
■Execute growth strategy of
Solutions businesses
■Steady improvement of
Mobile Terminals business
■Strengthen value chain of
NEC group
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Financial Summary
FY05/3
1Q Actual
Operating income
(% to Net sales)
Income before income taxes
Net income
(% to Net sales)
FY06/3
1st half
Forecast
1Q Actual
YOY
(Billion Yen)
Net sales
1,056.2
16.5
1.6%
40.4
20.9
2.0%
1,000.9
-21.1
YOY
-5.2%
-37.6
-2.1%
-28.9
-11.0
-69.3
-31.9
-1.1%
-2.3%
-44.3
28
14
-43.9
-11.2
0.6%
10.87
-5.66
-16.53
*
Free cash flow
-129.2
-119.2
+10.0
Interest-bearing debt
1,283.1
1,199.4
Net interest-bearing debt
810.3
786.2
D/E ratio (times)
1.8
1.4
Net D/E ratio(times)
1.1
0.9
83.7cut
24.1cut
0.4cut
0.2cut
18.1%
21.9%
+ 3.8%
*Net interest-bearing debt is Interest bearing debt less Cash and cash equivalents.
c NEC Corporation 2005
2,250
15
0.7%
EPS: Basic (in Yen)
Shareholders' equity ratio
As of July 28, 2005
（Forecasts as of July 28, 2005） 4
As of July 28, 2005
Key Points from Balance Sheet
(Billion Yen)
03/6
04/6
05/6
05/3
Total Assets
3,983.4
3,974.4
3,805.4
3,940.7
(Turnover)
(1.18)
(1.24)
(1.26)
(1.23)
Inv entories
636.3
669.5
584.4
528.9
(Turnover Days)
(49days)
(50days)
(44days)
(40days)
Interest-Bearing Debt
(D/E Ratio) <Times>
1,508.2
(4.0)
1,283.1
(1.8)
1,199.4
(1.4)
1,156.2
(1.5)
1,167.7
（3.1)
810.3
（1.1)
786.2
（ 0.9)
661.9
（0.8)
378.6
721.2
831.8
794.3
(9.5%)
(18.1%)
(21.9%)
(20%)
Net Interest-Bearing Debt
(Net D/E Ratio)<Times>
Shareholders' Equity
(Shareholders' Equity Ratio)
* “Total Assets Turnover” and “Inventories Turnover Days” are calculated by end-of–the–term and previous 12 months basis.
**Net D/E Ratio = D/E Ratio – “Cash and cash equivalents”
c NEC Corporation 2005
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As of July 28, 2005
Financial Results by Segment
１Q
(Billion Yen)
FY06/3
Actual
YOY
FY05/3
Actual
IT Solutions
Net sales
Profit/Loss
(to sales)
Network Solutions
Net sales
Profit/Loss
(to sales)
Electron Devices
Net sales
Profit/Loss
(to sales)
Others/Eliminations
etc.
427.6
13.7
3.2%
400.7
10.9
2.7%
243.9
15.6
6.4%
*
Net sales
-16.0
Profit/Loss
-23.7
-
(to sales)
Total
Net sales
Profit/Loss
(to sales)
c NEC Corporation 2005
1,056.2
16.5
1.6%
FY05/3
Actual
421.0 -1.5%
962.7
1.0 - 12.7
34.3
3.6%
0.2%
379.4 -5.3%
899.9
3.1
- 7.8
18.2
2.0%
0.8%
181.6 -25.5%
461.4
-9.8 - 25.4
33.8
7.3%
-5.4%
18.9
-20.8
-15.4
-27.0
1,000.9 -5.2% 2,303.2
-21.1 - 37.6
59.3
2.6%
-2.1%
1st half
FY06/3
Forecast
YOY
970
30
as of April
0.8%
970
- 4.3
30
3.1%
-6.7%
840
- 8.2
10
1.2%
395 -14.4%
-8 - 41.8
420
3.1%
840
10
1.2%
-2.0%
45
-17
4
1.0%
-
20
-
-29
-
2,250
15
0.7%
-2.3%
2,250
- 44.3
15
0.7%
（Forecasts as of July 28, 2005）
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As of July 28, 2005
IT Solutions Business
-1Q: Sales were almost flat YoY. Maintained segment profit, which was
better than expected, although it decreased YoY
（Billion Yen）
1 Q
（Billion Yen）
1 H
962.7
949.5
Personal
347.9
339.9
233.8
221.8
Approx
970
solutions
Sales
427.6
401.6
167.1
86.8 5.5
16.0
131.6
04/3
platform
（-2％）
161.7
164.0
97.0 13.7
20.5
89.2
18.1
148.3
149.7
05/3
06/3
Segment profit
c NEC Corporation 2005
421.0
Computer
Software
41.6
34.3
33.9
Approx.
48.9
30
326.1
352.1
SI/Services
1.0
04/3
05/3
06/3
Forecast
（Forecast as of July 28,2005)
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IT Solutions Business
As of July 28, 2005
■SI/Services
- Japanese market remains severe
- Strive to achieve our original forecast by enhancing market
creation and project management capabilities
■Computer platform
- Posted a slight loss due to seasonal factor, but better than
originally anticipated
- Aim to absorb price decline impact with stable unit sales
growth and cost reduction
■Personal solutions
- Secured profit in Q1 driven by unit sales growth in Japanese
market and cost reduction
c NEC Corporation 2005
8
Network Solutions Business
As of July 28, 2005
- 1Q segment profits exceeded forecast, although declined YoY (Billion Yen)
1 Q
(Billion Yen)
1 H
899.8
852.5
Social 115.0
Infrastructure
114.4
Broadband 221.9
287.8
Mobile 158.8
Infrastructure
188.1
Sales
379.4
388.6
400.7
50.7
88.7
47.8
42.9
111.8
123.9
74.2 10.6
175.0
04/3
77.8
10.9
114.6
05/3
06/3
840
25.0
Mobile
Terminals
18.2
356.8
98.0
163.3
Segment Profit
c NEC Corporation 2005
(-5%)
Approx.
Approx.
309.5
10
3.1
04/3
05/3
06/3
Forecast
(Forecasts as of July 28, 2005) 9
As of July 28, 2005
Network Solutions Business
■ Broadband business : robustly expanded mainly in Japanese market
-Communication service providers：
Accelerated demand for optical access networking systems etc.
and expanded the sales ahead of schedule
-Enterprises : Increased the sales of UNIVERGE solutions favorably
■ Mobile infrastructure : growth continued during FY1Q
-Japan :
Investments for service improvements increased
-Overseas：Sales of 3G base stations and PASOLINK exceeded our plan
■ Mobile Terminals : Sales dropped YoY, loss within scope of plan
1Q Shipment 2.4m units (approx. 30% decrease YoY)
-Japan : - Sales of 3G handsets could not fully offset decrease in PDC sales
- N901iS(launched June 24th) shipment growing in line w. plan
-Overseas : - Launched 3G i-mode handsets
employing outsourced platform (June)
- 2.5G handsets struggling due to price erosion etc.
c NEC Corporation 2005
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As of July 28, 2005
Sales of Mobile Terminals
Shipment volumes of mobile terminals
1H
7.7m units
Overseas 3G
20%
Overseas 2.5G 2/3
of Overseas
Domestic 3G
1Q
PDC
20%
Overseas
3.3
2/3
of Overseas
30%
1.8
80%
90%+
of Domestic
3/4
60%
of Domestic
30%+
80%
40%+
of Domestic
Domestic
60%+
90%+
70%-
60%of Domestic
80%of Domestic
Result
Result
Result
Result
Result
Result
03/3
04/3
05/3
06/3
03/3
04/3
c NEC Corporation 2005
decrease
50%+
of Overseas
3.8
40% 1/4 90%of Domestic of Overseas
70%
90%
2.4
80%of Overseas
YoY 10%-
40%-
90%+
of Domestic
4.1m
units
6.0
Result
05/3
Forecast
06/3
(Forecasts as of July 28, 2005) 11
Electron Devices Business
As of July 28, 2005
- FY06/3 1Q result: Profit decreased due to sequential sales decline
in the semiconductors area Sales
(Billion Yen)
300
Electronic Components
/Others
Displays
200
40
243.9
35.4
22.9
217.5
10.5
15.7
* PDP transferred to Pioneer Corp.
in 2Q of Mar. 05
15.6
204.9
202.4
25.1
14.5
20.7
15.8
18.2
Approx. 30
213
181.6
(yoy-26%)
20
20.4
15.1
Semiconductors
10
(NEC Electronics) 100
2.1
185.6
Approx.
2
1.3
191.2
0
165.3
165.9
146.1
-9.8
-10
0
1Q
2Q
3Q
4Q
1Q
05/3
(billion yen)
Prof it in the semiconductors area
c NEC Corporation 2005
Segment
Profit/Loss
(Billion Yen)
1Q
15.2
2Q
15.5
2Q(forecast)
06/3
3Q
1.2
4Q
1.3
1Q
-9.8
1H f orecast
-10
（Forecasts as of July 28, 2005） 12
Electron Devices Business
As of July 28, 2005
■ Semiconductor Solutions business:
- Demand is unsteady even after the easing of customers' inventory
adjustments. No visible signs of recovery.
- 1Q results (compared to 4Q of FY05/3):
- Sales of general-purpose microcontrollers and system LSIs
for mobile handsets declined.
- Sales of semiconductors for digital AV equipment were solid.
- Aim to improve profitability by implementing the mid-term growth
strategy focusing on sales increase.
■Color LCDs, electronic components:
-1Q results : Sales continued to be stable.
c NEC Corporation 2005
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As of July 28, 2005
Toward FY06/3 target (Full FY OP: ¥150 billion)
Cost Reduction through Total Process Transformation
◇ Focus Areas for FY06/3
● Reduce total material costs
● Capture/secure added value within NEC group
● Reform software/services business structure in order to
enhance profitability
● Expand Production Innovation to total Value Chain
Planning/Development/
Design
Procurement/
Manufacture
Expand to total Value Chain
Logistics/Sales/
Maintenance
Customers
SCM Production Innovation
Expand to software and services area
=> Set up “MONOZUKURI Innovation Unit”
in order to strengthen NEC Group’s Value Chain （15
th
c NEC Corporation 2005
Jul, 2005）
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c NEC Corporation 2005
15